Assurance of discontinuance signed by Delaware Life filed with Suffolk Superior Court
On May 23, 2018, the Attorney General filed a formal assurance of discontinuance d in Suffolk County Superior. In the assurance of discontinuance signed by the Delaware Life Insurance Company, Delaware Life agreed to pay $244,000 to resolve allegations that it failed to provide payments and forms in a timely and accurate manner for certain annuity contracts owned or benefiting Massachusetts residents.
In the assurance of discontinuance, the Attorney General’s Office alleged that Delaware Life violated Massachusetts consumer protection law when its systems failed to properly administer annuity contracts, resulting in delayed payments and tax forms to policyholders and beneficiaries.
In announcing the settlement agreement contained in the assurance of discontinuance, Attorney General Maura Healy said:
People should be able to trust their insurance companies to provide accurate, on-time payments, forms, and other important documents. Through this settlement, Delaware Life will compensate affected customers for delays and make improvements to its administrative system to ensure this doesn’t happen to Massachusetts consumers again.”
Late payment complaints alert Attorney General to problem
The Attorney General’s Office began investigating Delaware Life’s administration of its annuity contracts after receiving complaints from Massachusetts customers concerning delays. Using her investigative authority under M.G.L. c. 93A, §6, allowing the Attorney General to demand documents and take testimony under oath from any business she believes may have violated the unfair or deceptive business practices provisions of § 2, of Chapter 93A.[pullquote][the assurance of discontinuance] …does not constitute an admission by Delaware Life of liability or wrongdoing.”[/pullquote]
Based on her office’s investigation, the Attorney General’s Office alleged that Delaware Life violated the Massachusetts unfair and deceptive business practices act by:
- failing to make certain annuity-related payments, including death benefit payments, in a timely manner;
- failing to provide certain individuals with correct forms and instructions in response to the individuals’ annuity-related payment requests;
- failing to maintain systems that could be expected to result in timely and accurate payments in connection with certain annuity contracts; and
- failing to send to certain individuals a timely IRS Form 1099-R reflecting distributions from annuity contracts.
In response to the Attorney General’s investigation’s conclusions, Delaware Life claimed the alleged violations largely related to a group of annuities transferred in October of 2015, to a third-party administrative platform. The transfer had been carried out in connection with a corporate change of ownership in August of 2013, that required changing administrative platforms for these annuities.
Assurance of discontinuance affects two thousand individuals
As part of the settlement agreement, Delaware Life was required within ten days of the filing of the assurance of discontinuance with the Superior Court to provide a report to the Attorney General’s Office on the remedial actions relating to death benefits including:
(a) a list of the individuals who received an incorrect death benefit payment between October 5, 2015, and July 31, 2017, from Delaware Life on any of its annuities;
(b) the annuity contract number for such individuals;
(c) the annuity product name involved in the incorrect payment;
(d) the date and amount of the incorrect payment;
(e) the amount Delaware Life has calculated as necessary to pay the correct death benefit payment with interest at six percent for the time the correct payment was delayed for each individual listed on the death Benefit Report.
Based on these calculations, Delaware Life will pay $214,000 to nearly 2,000 individuals who experienced delays in payments or failed to receive forms required to complete tax returns on time.
Delaware Life will pay thirty-thousand dollars and a surcharge equal to 3.3% of death benefit corrections and settlement payment to the Commonwealth
In addition to the money paid to the annuitants or beneficiaries who experienced delayed payment or late tax documents, Delaware Life agreed to pay within five days of the filing of the assurance of discontinuance’s filling with the Superior Court, a $30 thousand payment to the Commonwealth. The settlement agreement’s terms specifically designated that no part of this payment “shall be considered a penalty or fine.”
The assurance of discontinuance also provided for Delaware Life to make a further payment to the Commonwealth equal to 3.3% of the sum of the corrected death benefit payments. The settlement agreement also designated that no part of this payment would be “considered a penalty or fine.”
Delaware Life neither admits nor denies allegations of the assurance of discontinuance
The assurance of discontinuance provides that Delaware Life entered into the agreement “for settlement purposes only and neither admits nor denies the Attorney General’s allegations.” However, in the same document, the Attorney General and Delaware Life agree that her acceptance of the assurance of discontinuance from Delaware Life, “is not acceptance or approval by the Attorney General of any of Delaware Life’s business practices, and Delaware Life will make no representation to that effect.”
Finally, the assurance of discontinuance provides that since the settlement agreement was “made without any trial or adjudication or judicial finding of any issue of fact or law…[the assurance of discontinuance]…does not constitute an admission by Delaware Life of liability or wrongdoing.”
Attorney General’s team
Assistant Attorney General Brook Kellerman, Legal Analyst David Lim, and Deputy Director Arwen Thoman, all of the Attorney General’s Insurance and Financial Services Division, handled the investigation and resolution of the Delaware Insurance matter.
How to obtain a copy of the Assurance of Discontinuance as filed
For a free copy of the Assurance of Discontinuance as filed with Suffolk Superior Court by the Attorney General, send your request to scotter@agencychecklists.com.
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